Building permits reveal construction slowdown

New data reveals that Alberta’s construction is set to slow in 2018. In October, Alberta’s towns and cities issued $992 million worth of building permits, a reduction of 24 per cent or $320 million from September.

Building permits are an excellent forward-looking indicator of construction activity, and there are new signs of weakness as we head into the new year. Residential permits fell almost $95 million from September, the most significant monthly reduction of 2017. What’s more troubling is the change from 2016 (-56 per cent). However, it is worth pointing out that in October of last year, residential permits peaked due to changes in building codes.

The value of non-residential permits also fell over the course of the month too. Construction permits in the non-residential sector also experienced the largest monthly drop of the year by declining $230 million. Permits fell to $391 million in October. Compared to a year ago, non-residential permits are approximately 41 per cent lower.

Permits for both commercial and governmental and institutional buildings helped shrink total non-residential activity. Permits for office towers and shopping malls experienced substantial losses over the course of the month (-17.2 per cent) and are still down significantly from where they were at the same time last year (-61.1 per cent). This has been ongoing throughout 2017 as more new office towers move towards completion.

If there is a bright side from the latest building permit report, it’s that the industrial category more than doubled its construction intentions over the course of the month. This underscores that, after a two-year hiatus, Alberta’s energy and manufacturing sectors appear to be on the road to recovery.